New Delhi: India’s new federal budget points to a slower pace of cutting the fiscal deficit, according to Fitch Ratings, even as the government continues to support economic growth through higher spending on development.
The budget for the 2026 to 2027 financial year was presented by Finance Minister Nirmala Sitharaman. It targets a fiscal deficit of 4.3 percent of gross domestic product, slightly lower than the previous year but not falling as fast as earlier plans had suggested.
Fitch said the budget is broadly neutral for growth. This means it does not strongly push the economy forward but also does not slow it down. The agency noted that India is still moving toward fiscal discipline, but at a more gradual speed.
The government has projected economic growth between 6.8 percent and 7.2 percent in the coming year. Fitch said strong growth could help improve India’s financial position over time, even if deficit reduction is slower.
Public debt is expected to remain high, with the debt to GDP ratio estimated at about 55.6 percent. Fitch said this shows the challenge India faces in balancing spending needs with long term fiscal stability.
The budget also plans record borrowing to fund infrastructure and other development projects. Capital spending has been increased to support roads, railways and industrial growth. At the same time, revenue growth is seen as modest, partly due to earlier tax cuts and rising interest payments on government debt.
Other credit rating agencies gave similar views. Moody’s described the budget as tactical rather than a major change, saying it makes small adjustments without transforming India’s fiscal outlook. Analysts said the budget focuses more on steady growth than on sharp deficit cuts.
Fitch added that continued reforms and strong private investment will be important for India to improve its credit profile in the future. The agency said the government still faces pressure to control borrowing while meeting the needs of a growing economy.
The budget reflects India’s attempt to walk a careful line between supporting growth and managing public finances, at a time when global economic conditions remain uncertain.